QUOTE AND NEWS
Wall Street Journal  Apr 2  Comment 
Wausau Paper Corp. said President and CEO Henry Newell stepped down and Chairman Thomas Howatt plans to retire as the tissue company faces pressure from activist investors.
StreetInsider.com  Mar 12  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Guidance/Newell+Rubbermaid+%28NWL%29+Says+Q1+EPS+Impacted+by+Weather/9275668.html for the full story.
Forbes  Mar 5  Comment 
Setting: a sunny office in Boulder, Colorado. Magic the dog sleeps on a pillow. Liz is drawing with a black Sharpie when the phone rings.
TechCrunch  Mar 4  Comment 
Have you ever found out one of your heroes is doing an ask-me-anything on reddit.... only to realize that it already ended like 10 hours ago? Gabe Newell, co-founder of Valve and all around really-cool-guy, is doing an AMA. Right now. It started...
StreetInsider.com  Feb 21  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Newell+%28NWL%29+Reaffirms+Outlook+Into+CAGNY+Conference/9200075.html for the full story.
Benzinga  Feb 13  Comment 
Newell Rubbermaid (NYSE: NWL) announced today that its Board of Directors has approved an extension and expansion to the Company's on-going share repurchase program. Under the updated plan, effective immediately, Newell Rubbermaid is authorized to...
StreetInsider.com  Feb 13  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Dividends/Newell+Rubbermaid%2C+Inc.+%28NWL%29+Declares+%240.15+Quarterly+Dividend%3B+1.9%25+Yield/9164640.html for the full story.
Wall Street Journal  Feb 12  Comment 
Newell Rubbermaid's Graco is recalling 3.77 million child seats because of defective belt harnesses that in some cases won't unlatch and trap children in the seat.
SeekingAlpha  Jan 31  Comment 
Newell Rubbermaid (NWL) Q4 2013 Earnings Call January 31, 2014 9:00 am ET Executives Nancy O'Donnell - Vice President of Investor Relations Michael B. Polk - Chief Executive Officer, President and Director Douglas L. Martin - Chief...
Wall Street Journal  Jan 31  Comment 
Newell Rubbermaid's profit grew 15% on broad sales growth, led by a strong gain for the baby and parenting unit.




 

Newell Rubbermaid Inc. (NYSE: NWL) makes consumer goods in over 20 brands, including: Rubbermaid Sharpie, Calphalon, and Graco. Newell Rubbermaid's products include plastic bins, cookware, writing instruments, power tools, and baby strollers. Around 90% of households in the United States own at least one Newell Rubbermaid product.[1] Newell Rubbermaid products are mostly branded, semi-durable, and discretionary, so demand fluctuates with economic conditions.

Since 2004, Newell Rubbermaid has completed 15 strategic acquisitions and divestitures[2] and outsourced 75% of production to China.[3] However, macroeconomic conditions like slowing U.S. consumer spending and a 22% increase in the cost of resin[4] have driven up costs and decreased potential revenue. Rising costs are linked to a larger trend of raw material inflation, especially of oil, the basic raw material used to make plastic. Also, Newell Rubbermaid changes its prices only twice per year, and most of its pricing decisions reflect the demands of its large retail customers, like Wal-Mart (WMT).[5]

Company Overview

Rubbermaid is the maker of families of leading brand names and profitable and innovative products, including Rubbermaid, Paper Mate, Parker, Waterman, and Calphalon, among others. The company markets its multi-product offering through high-volume retailers, including discount, drug, grocery and variety chains; warehouse clubs; department, hardware and specialty stores; home centers; office superstores; and contract stationers. The Company’s largest customer, Wal-Mart (which includes Sam’s Club), accounted for approximately 12% of net sales in 2009.[6] The Company’s top ten customers in 2009 included Bed Bath & Beyond, Lowe’s, Office Depot, OfficeMax, Staples, Target, The Home Depot, Toys ‘R’ Us, and W.W. Grainger.

Business and Financial Metrics

First Quarter 2010 Results[7]

Rubbermaid reported net income of $58.4 million, or $0.19 per diluted share. This compares to $33.7 million, or $0.12 per diluted share, in the first quarter 2009. Net sales increased 8.5 percent to $1.3 billion in the first quarter, compared to $1.2 billion in the prior year. Core sales improved 7.2 percent. The company estimates that 2 to 3 percent of the core sales increase reflects increased consumer demand while the remainder is attributable to selective customer inventory restocking and a timing shift in customer buying patterns from the second quarter to the first quarter. Foreign currency translation contributed 2.5 percent to the company’s net sales improvement, while the year over year impact of last year’s product line exits reduced net sales by 1.2 percent. Gross margin for the quarter was 36.1 percent, up 100 basis points from last year as productivity gains and improved product mix more than offset the impact of inflation during the quarter.

Business Segments

Home & Family (42.6% of 2009 sales)[6]

Rubbermaid's Home & Family segement manufactures infant and juvenile products such as car seats, strollers, highchairs, and playards; gourmet cookware, bakeware, cutlery and small kitchen electrics; hair care accessories; cabinet hardware, drapery hardware and window treatments; and indoor/outdoor organization, food storage, and home storage products. This segment's brands include:

  • Rubbermaid
  • Graco
  • Aprica
  • Levolor
  • Cephalon
  • Goody

Office Products (30% of 2009 sales)[6]

The Office Products segment manufactures writing instruments, including markers, highlighters, pens, pencils, and fine writing instruments; office technology solutions such as label makers and printers, interactive teaching solutions, card-scanning solutions, and on-line postage; and art products. Key brands include:

  • Sharpie
  • Paper Mate
  • Dymo
  • Parker
  • Waterman

Tools, Hardware & Commercial Products (27.4% of 2009 sales)[6]

The Tools, Hardware & Commercial Products segment manufactures hand tools, power tool accessories, industrial bandsaw blades, propane torches, and manual paint applicators; window hardware; cleaning and refuse products, hygiene systems and material handling solutions. Key brands include:

  • Lenox
  • Irwin
  • Rubbermaid Commercial Products
  • Technical Concepts

Trends and Forces

The rising cost of resin

As oil costs rise, Newell Rubbermaid is impacted on two fronts: production and distribution.[8] Simultaneously, the rising cost of oil drives up transportation costs, functionally undermining the benefit of outsourced manufacturing. Since Asia provides around 75% of Newell Rubbermaid's goods, but less then 4% of revenue, the company has no choice but to transport goods over long distances from manufacturing centers to markets. Moreover, because Newell Rubbermaid only revises product prices every six months (January and July), any unanticipated input cost inflation cuts into the company's gross margin until the company's next opportunity to raise prices.[9]

Newell Rubbermaid's reliance on a few major, high-volume customers limits its ability to raise prices to match costs.

Newell Rubbermaid's top 10 customers include “big box” commercial retailers like Wal-Mart, Target, Office Depot, and Home Depot.[10] Wal-Mart, Newell Rubbermaid’s largest customer, has accounts for 12-13% of total sales.[11] The consolidation of the retail industry into a few major stores has given retailers a bargaining advantage, encouraging price competition between suppliers and making it harder for Newell Rubbermaid to maintain its profit margins.[12] For instance, when resin costs tripled between 1994 and 1996, Rubbermaid’s attempt to raise prices to maintain its gross margin caused Wal-Mart, its largest customer, to backlash and replace Rubbermaid products with those of a competitor. Rubbermaid lost millions and was driven into a merger with Newell by 1999.[13] Moreover, when faced with low discretionary spending, large retailers promote their own private label goods to compete directly with Newell Rubbermaid's branded products.[14]

Newell Rubbermaid’s revenue fluctuates with the economy, since it relies on discretionary consumer spending.

In economic downturns, consumers either delay the purchase of discretionary goods or opt for cheaper alternatives, like private label products. Most Rubbermaid products are discretionary items, and sales of Rubbermaid's products decline sharply during recessions.

Competition

Cleaning, Organization, and Décor

  • Tupperware (TUP) offers resin-based food storage bins that rival Rubbermaid kitchen storage products. However, the company earns 77% of its Tupperware revenue from outside North America.[15] Tupperware also employs direct selling methods that avoid large retailers. [16]
  • Jarden (JAH), another consumer goods conglomerate, sells food storage products under the brand-name FoodSaver.

Tools and Hardware

  • Fortune Brands (FO), a conglomerate with hardware, spirits, and golf segments, competes with Newell Rubbermaid's Allison cabinet hardware. Fortune Brands is the exclusive cabinet supplier for Home Depot (HD) and Lowe's Companies (LOW).
  • Black & Decker (BDK), a major supplier of power tools in the United States, competes with Newell Rubbermaid's Lenox and Irwin brands. Black and Decker has been adversely impacted by the U.S. Housing slowdown, while Newell Rubbermaid has been able to compensate for decreasing growth in Tools and Hardware with its other business segments.

Home and Family

  • Lifetime Brands (LCUT) offers consumer products, especially for domestic kitchens, through a set of 35 brands. Lifetime Brands competes with Newell Rubbermaid's culinary products, particularly its Calphalon and Kitchen Essentials product lines.

References

  1. Dave Casey, Director Global Transportation at NWL, Presentation at Georgia Foreign Trade Conference, 1/14/2008
  2. Newell Rubbermaid Press Releases
  3. NWL Q1 Earnings Call 4/24/2008 (transcript)
  4. NWL Q1 Earnings Call 4/24/2008 (transcript)
  5. NWL Q1 Earnings Call 4/24/2008 (transcript)
  6. 6.0 6.1 6.2 6.3 Newell Rubbermaid 10-K 2009
  7. CDTV: "Earnings Review: Newell Rubbermaid (NYSE: NWL) Reports First Quarter 2010 Results"
  8. OPEC Reference Prices
  9. NWL Q1 Earnings Call 4/24/2008 (transcript)
  10. NWL 2007 10-K page 9
  11. NWL 2007 10-K page 4
  12. NWL 2007 10-K page 9
  13. New York Times, "As Biggest Business, Wal-Mart Propels Changes Elsewhere," 10/12/2000
  14. NWL 2007 10-K page 9
  15. TUP 2007 10-K page 23
  16. TUP 2007 10-K page 5
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